Premium Based Tick Size

Dutch single stock options are traded via the innovative “Premium Based Tick Size” (PBTS). With PBTS, Euronext makes it possible to trade with a 1 euro cent (€ 0.01) tick size for premiums below or equal to the premium threshold and a 5 euro cents (€ 0.05) tick size applies for all premiums above the premium threshold.

Two premium thresholds are applicable:

• For equity options of which the underlying shares make up the AEX-index® and for equity options on the German underlyings the premium threshold is € 5.00
• For the other equity options the premium threshold is € 0.50

For investors, the € 0.01 tick size means that there is a greater possibility of more granular pricing thereby increasing trading opportunities. PBTS also makes it possible to reduce the bid-offer spread, which potentially leads to lower trading costs. Research after the introduction of PBTS in 2009 showed that the average bid-ask spread of series below the premium threshold almost halved in 2009; the implied trading costs are therewith considerably lower.

Validation at Order Entry

With PBTS the price of an order at order entry determines the tick size:

If the premium of an order at order entry is below or equal to the premium threshold, the tick size is € 0.01.

If the premium of an order at order entry is abovethe premium threshold, the tick size is € 0.05.

The premium of any incoming order is validated against the relevant tick size. If an order is not a multiple of the relevant tick size, it will be rejected.

The table below shows which prices are available for trading around the premium threshold of € 0.50. From a price of € 0.50 the next valid higher price is € 0.55 whilst the next valid lower price is € 0.49.

Valid prices around the premium threshold

Premium

Tick size € 0.01

€ 0.01
…
€ 0.45
€ 0.46
€ 0.47
€ 0.48
€ 0.49

Premium threshold

€ 0.50

Tick size € 0.05

€ 0.55
€ 0.60
€ 0.65
…

Strategy Orders

The PBTS tick size rules also apply to strategy orders. At order entry, the limit price of a strategy order is subject to validation, not the separate leg prices, except for the tick size validation for the strategy order in the Guaranteed Cross facility. The tick size validation for strategy orders in the Guaranteed Cross facility will be performed ex-post.

Tick size validation

The tick size is validated at order entry except for the Guaranteed Cross facility. The tick size validation for the Guaranteed Cross facility will be performed ex-post.

Odd Prices

There is a possibility that prices appear in the Central Order Book, or that trades are executed against prices, that do not comply with the tick size rules. These are so-called "odd-prices", which are prices above the premium threshold with a tick size of € 0.01. This can, for example, occur after the creation of implied prices. An implied price is created from a combination order and results in a price in the single order book. Odd prices can also result from the creation of orders at the uncrossing.

An odd price can be traded in the normal way by entering a market order, a limit order with a crossing price and an "Immediate or Cancel" order (with a crossing price or the odd price as limit).

Premium Based Tick Size for Belgian stock options:

PBTS is also used for Euronext’s Brussels market. There is no difference between PBTS for the Amsterdam market and the Brussels market:

Orders with a premium below or equal to the premium threshold have a tick size of € 0.01.

Orders with a premium above the premium threshold have a tick size of € 0.05.

More information
The list of premium thresholds per equity option class is available on the contract specification page, which can be accessed via a contract in the contract list.